The UAE’s Federal Tax Authority (FTA) put out Public Clarification VATP041 on April 14, 2025, to provide clear guidance on how the VAT handled on SWIFT messages for financial institutions. Replacing the earlier VATP036, this clarification addresses the compliance requirements for interbank services received from non-resident banks via the SWIFT system. 

What is VATP041?

The FTA released VATP041 to make clear how VAT should be applied to interbank services received through SWIFT messaging. It takes the place of VATP036, which came out in February 2024, and makes two important areas clearer: 

(a)  The obligation to issue tax invoices for SWIFT transactions.

(b) The documentary requirements for recovering input VAT on these services. 

VATP041 is clear about its scope, unlike VATP036, which was a little vague. It only applies to SWIFT-related services and introduces the idea of “Qualifying SWIFT Messages” as tax invoice substitutes. This clarification is a sector-specific application of the general VAT rules in specified VATP044 (May 2025) on Concerned Services. 

Understanding Concerned Services and the Reverse Charge Mechanism

When a UAE VAT-registered entity receives “Concerned Services” (services from outside the UAE and place of supply is in the UAE), under here this situation treated as entity is making a taxable supply to itself. This triggers the reverse charge mechanism, as per Article 48(1) of Federal Decree-Law No. 8 of 2017 on Value Added Tax (the “Decree-Law”). The recipient (who gets the service) must: 

  • (a) Account for VAT on the service. 
  • (b) Issue a tax invoice to itself, unless they have other proof. 

VATP044 makes it clear that self-invoicing is usually not necessary if the foreign supplier provides a tax invoice or equivalent document. VATP041 applies this principle to SWIFT services, recognizing the impracticality of issuing tax invoices for the large number of SWIFT transactions happen every day. 

Important Points Covered VATP041

VATP041 simplify VAT compliance for banks and other financial organizations. Below are the key points: 

  1. Scope Limited to SWIFT Services

Only SWIFT services are in scope VATP041 only applies to interbank services that are sent and received using the SWIFT communication system. It does not cover other types of Concerned Services, ensuring clarity on its applicability. 

  1. Qualifying SWIFT Messages

A significant addition in VATP041 is the concept of a Qualifying SWIFT Message. To serve as a substitute for a tax invoice, a SWIFT message must include: 

  • (a) Name and address of the non-resident bank (SWIFT sender/supplier). 
  • (b) Name of the UAE financial institution (SWIFT receiver/customer). 
  • (c) Date of the transaction. 
  • (d) SWIFT Message reference number. 
  • (e) Transaction reference number. 
  • (f) Description of the transaction. 
  • (g) Consideration charged and the currency used. 

If these details are included, the SWIFT message is considered sufficient evidence (proof) of the supply, so there is no need for a self-issued tax invoice. 

  1. Waiver of Self-Invoicing Requirement

The FTA has decided to use its discretion under Article 59(7)(b) of the Executive Regulation (Cabinet Decision No. 52 of 2017) to waive the requirement for a tax invoice to be issued for SWIFT transactions. This is due to the heavy administrative burden imposed by the requirement for self-invoicing, considering the very large number of SWIFT messages processed every day. A Qualifying SWIFT Message is accepted as equivalent to a tax invoice issued by the non-resident supplier. 

  1. Input VAT Recovery

Input VAT on SWIFT services can be recovered by financial institutions paying for costs that support taxable supplies in terms of Article 54(1) of the Decree-Law. A Qualifying SWIFT Message is sufficient documentation for purposes of input VAT recovery under Article 55(1)(a)3, provided: 

  • (a) The institution retains (kept) the message. 
  • (b) Payment is made or intended within six months of the agreed payment date. 

For more details on input VAT recovery timeframes, refer to Public Clarification VATP017. 

“A SWIFT service will be received by a UAE financial institute from a non-resident bank on 3 April 2025 and incurred banking charges for it. Normally, a tax sales invoice would have had to be generated by that financial institution and sent to itself by 17 April 2025, that is, within the stipulated 14 days. However, a Qualifying SWIFT Message with all the above-prescribed details will exempt that institution from self-invoicing and using that message as a basis for recovering input VAT on its tax return.” 

Implications for Financial Institutions

VATP041 makes it much easier and reduces the compliance burden for UAE financial institutions by: 

  • (a) Removing the need to issue tax invoices for SWIFT transactions if a Qualifying SWIFT Message is retained (kept). 
  • (b) Making it easier to get back input VAT by accepting Qualifying SWIFT Messages as proof. 
  • (c) Providing a clear framework to ensure compliance with UAE VAT regulations. 

However, institutions must ensure that SWIFT messages meet the Qualifying SWIFT Message criteria. Keeping good records is also important for making input VAT claims.